The market remains strangled by the same problems I raised in this space during the summer of 2007. The financial institutions that supply credit to the economy are crashing. We’ve heard numerous calls for a “bottom” that were ephemeral at best. Interest rates are at zero, the Treasury and FED have added hundreds of billions in liquidity, we are about to see a second stimulus bill pass to the size of $850 billion. Nothing has worked. And to be honest, I’m not sure what will work.
And that is why you cannot own any financial stock (save for GS or MS without pairing with aggressive shorts elsewhere). On February 1 I recommended owing GS and MS while shorting ZION and STI. Ten trading days later, GS is up 7.% while MS is flat; ZION and STI are down 27% and 37%, respectively. The regional banks are heading to the mid single digits, like C and then BAC before them.
The agriculture names also escaped much of yesterday’s selling. POT was down just 1.3%; MOS lost 3.2%. These long positions should now be paired with other commodity shorts such as AKS – down 13% on huge volume yesterday.
Being long anywhere else in this market is just too risky. The DOW broke below the 8,000 mark and is likely headed to the 7,500 low from November. And if when this level breaks, everything will be taken down.
